Disposable medical suppliers in big demand in M&A boom

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Growing worldwide demand for disposable medical products is fuelling a boom in mergers and acquisitions as companies rush to get into the market, according to Clearwater Corporate Finance.

It says that disposables are fast becoming the hottest segment of the healthcare industry in Europe and North America, due largely to the growing number of over-65s and increased emphasis on hygiene.

“Disposable products are playing an important role in the treatment of an ever wider range of conditions,” says Constantine Biller, healthcare analyst at Clearwater. “New legislation and higher standards are creating growing demand for all types of medical equipment and supplies to become disposable, especially for products that treat age-related conditions.

“The strongest gains in the sector are for products such as angioplasty supplies, catheters, colostomy and incontinence products, home drug delivery devices, prefilled inhalers and syringes, rapid diagnostic equipment, tissue sealants and wound healing products. These products are able to tap into the changing dynamics of the healthcare industry, as health authorities encourage more care in the home and patients explore self-treatment and preventative medicines. Indeed, the home healthcare segment is one of the key focuses for many suppliers of disposable medical products.”

Although Europe and North America currently account for over 75 per cent of the spending on medical supplies at present, the Asia-Pacific market is expected to achieve the fastest growth in the coming years, thanks mainly to its growing population, increasing health awareness and rising standards of living.

“These trends have fuelled a boom in mergers and acquisitions involving suppliers of disposable medical products,” adds Biller. “The biggest players such as 3M, Baxter, Becton Dickinson, Bunzl, Johnson & Johnson, Kimberly-Clark, Teleflex and Tyco have all been active in the market, whilst Molnlycke Healthcare was acquired by Investor and Morgan Stanley and is continuing to look for acquisitions.”

As well as the larger operators there are numerous smaller players that are keen to penetrate new product segments and geographies. Whilst being attentive to acquisition opportunities these companies are aware that they need to stay ahead of consumer attitudes and spending patterns. They recognise that with patients increasingly exploring self-treatment procedures, there is enormous potential for brand-building and long-term customer retention in the disposable medical supplies sectors.

In February 2007 Clearwater completed the sale of Pelican Healthcare Ltd, a Cardiff-based manufacturer of disposable feminine hygiene and stoma care products, to TG Eakin Ltd. The purchaser was a privately-owned manufacturer of stoma and woundcare products based in Northern Ireland.

“TG Eakin was looking broaden its range of disposable medical products, develop its R&D expertise in new areas and enhance its position in the UK market,” states Biller. “This transaction is a great example of how two privately-owned businesses can complement each other. It also allows both sets of shareholders to maximise the returns from their investments in this sector.”